VOT Research Desk
Nov 4
Analytics and Recommendations
A hawkish Federal Reserve dampened risk appetites, and three major US benchmark indices closed in the red for a fourth straight session. Market participants are now anticipating the release of October’s nonfarm payrolls data later in the day. The December S&P 500 futures (ESZ22) are currently trending up +0.68%. Losses in the Technology, Telecoms, and Financials sectors were the main contributors to the decline of three important U.S. stock indices.
However, a separate report revealed that growth in the services sector slowed in October, maintaining the Fed’s aggressive interest rate hike policy. Economic statistics released on Thursday nonetheless showed that the labor market is still strong.
The Fed’s role used to be to remove the punch bowl, and maintaining that balance is always a challenge. You want the economy to slow down to prevent inflation from out of control, but you also want enough earnings to support stock values.
In the meanwhile, December’s monetary policy meeting is expected to result in a 44.8% likelihood of a 50 basis point rate increase and a 55.2% chance of a 75 basis point hike, according to U.S. rate futures. In addition, the peak Fed funds rate is anticipated to reach at least 5%, up from an earlier projection of an increase to the region of 4.50%-4.75%.
In the next few hours, all eyes will be on U.S. Nonfarm Payrolls data. Investors are likely to focus on the U.S. Average Hourly Earnings data, which was at +0.3% m/m and +5.0% y/y in September, and economists anticipate that October Nonfarm Payrolls will stand at 200K, as opposed to the previous value of 263K.The new figures are anticipated by economists to be +0.4% m/m and +4.7% y/y.
The Unemployment Rate in the United States will also be reported today. In October, this number is expected to be 3.6%, up from the previous figure of 3.5%, according to economists.
The 10-year interest rate in the United States is 4.133%, up +0.22%, on the bond markets.
This morning, ahead of the widely anticipated U.S. Nonfarm Payrolls report, European equities have received a positive handover from Asia on China reopening speculation. As a result, the Euro Stoxx 50 futures are up +1.31%.Because of this, major European industries opened positively, with luxury and mining stocks rising the most despite significant exposure to China.
The Eurozone S&P Global Composite PMI, Eurozone Services PMI, U.K. Construction PMI, Germany Factory Orders, Spain Services PMI, Italy Services PMI, France Services PMI, and Germany Services PMI were all released today.
As the largest economy in the Eurozone struggled with rising energy costs, German September Factory Orders came in at -4.0% m/m, below expectations of -0.5% m/m.
The Spanish October Services PMI was reported at 49.7, which was higher than the 48.3 that was expected.
- The Italian Services PMI for October came in at 46.4, which was lower than the expected 48.5.
- The French Services PMI for October came in at 51.7, exceeding expectations of 51.3.
- The German Services PMI for October came in at 46.5, exceeding expectations of 44.9.
- The Eurozone October S&P Global Composite PMI was reported at 47.3, which was higher than what was anticipated, which was 47.1.
- The Eurozone Services PMI for October came in at 48.6, which was higher than expected at 48.2.
- The UK Construction PMI was 53.2 in October, exceeding expectations of 50.5.
Today’s trading on Asian stock markets was mixed.
The Nikkei 225 Stock Index (NIK) in Japan closed down -1.68 percent, while the Shanghai Composite Index (SHCOMP) in China closed up 2.43 percent.
The Shanghai Composite in China closed sharply higher today on renewed speculation regarding the possibility of COVID restrictions being lifted.
However, new rumors that this policy will soon undergo a significant change circulated earlier on Friday, despite the fact that Chinese authorities denied that they were considering reducing COVID curbs.
The Power, Railway & Bus, and Precision Instruments sectors fueled today’s decline in the Japan Nikkei 225 Stock Index.
The implied volatility of Nikkei 225 options is taken into account in the Nikkei Volatility, which closed at a new one-month low of 21.88.
The Japanese Services PMI increased at its fastest rate in four months in October, reaching 53.2.
